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                           PURCHASE AND SALE AGREEMENT

                                  BY AND BETWEEN

                     REDFISH BAY DEVELOPMENT CORPORATION AND
                              PI ENERGY CORPORATION

                                      BUYER

                                       AND

                           MIDLAND RESOURCES, INC. AND
                          SUMMIT PETROLEUM CORPORATION

                                      SELLER



                         DATED EFFECTIVE FEBRUARY 1, 1997




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TABLE OF CONTENTS
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ARTICLE 1: SUBJECT MATTER, DEFINITIONS AND RULES OF CONSTRUCTION
1.01 Subject Matter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Definitions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
          1.02.01   "Affiliate". . . . . . . . . . . . . . . . . . . . . . . . 1
          1.02.02   "Agreed Rate". . . . . . . . . . . . . . . . . . . . . . . 1
          1.02.03   "Agreement". . . . . . . . . . . . . . . . . . . . . . . . 1
          1.02.04   "Assets" . . . . . . . . . . . . . . . . . . . . . . . . . 2
          1.02.05   "Assumed Liabilities". . . . . . . . . . . . . . . . . . . 3
          1.02.06   "Business Day" . . . . . . . . . . . . . . . . . . . . . . 3
          1.02.07   "Closing". . . . . . . . . . . . . . . . . . . . . . . . . 3
          1.02.08   "Closing Date" . . . . . . . . . . . . . . . . . . . . . . 3
          1.02.09   "Code" . . . . . . . . . . . . . . . . . . . . . . . . . . 4
          1.02.10   "Contracts". . . . . . . . . . . . . . . . . . . . . . . . 4
          1.02.11   "Corporate Documents"  . . . . . . . . . . . . . . . . . . 4
          1.02.12   "Easements". . . . . . . . . . . . . . . . . . . . . . . . 4
          1.02.13   "Effective Date" . . . . . . . . . . . . . . . . . . . . . 4
          1.02.14   "Excluded Assets"  . . . . . . . . . . . . . . . . . . . . 4
          1.02.15   "Excluded Facilities". . . . . . . . . . . . . . . . . . . 4
          1.02.16   "Facilities" . . . . . . . . . . . . . . . . . . . . . . . 4
          1.02.17   "Governmental Body". . . . . . . . . . . . . . . . . . . . 4
          1.02.18   "Hydrocarbon Inventory". . . . . . . . . . . . . . . . . . 5
          1.02.19   "Hydrocarbons" . . . . . . . . . . . . . . . . . . . . . . 5
          1.02.20   "Identification Date". . . . . . . . . . . . . . . . . . . 5
          1.02.21   "Included Facilities". . . . . . . . . . . . . . . . . . . 5
          1.02.22   "Knowledge". . . . . . . . . . . . . . . . . . . . . . . . 5
          1.02.23   "Leases" . . . . . . . . . . . . . . . . . . . . . . . . . 5
          1.02.24   "Line Fill". . . . . . . . . . . . . . . . . . . . . . . . 5
          1.02.25   "Losses" . . . . . . . . . . . . . . . . . . . . . . . . . 5
          1.02.26   "Material Contracts" . . . . . . . . . . . . . . . . . . . 5
          1.02.27   "Other Contracts". . . . . . . . . . . . . . . . . . . . . 6
          1.02.28   "Other Property" . . . . . . . . . . . . . . . . . . . . . 6
          1.02.29   "Party". . . . . . . . . . . . . . . . . . . . . . . . . . 7
          1.02.30   "Person" . . . . . . . . . . . . . . . . . . . . . . . . . 7
          1.02.31   "Plugging and Abandonment" . . . . . . . . . . . . . . . . 7
          1.02.32   "Property" . . . . . . . . . . . . . . . . . . . . . . . . 7
          1.02.33   "Tax"  . . . . . . . . . . . . . . . . . . . . . . . . . . 7
          1.02.34   "Third Person" . . . . . . . . . . . . . . . . . . . . . . 7
1.03 Other Definitions in this Agreement.  . . . . . . . . . . . . . . . . . . 7
1.04 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . 8


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          1.04.01   General. . . . . . . . . . . . . . . . . . . . . . . . . . 8
          1.04.02   Articles.. . . . . . . . . . . . . . . . . . . . . . . . . 9
          1.04.03   Exhibits and Schedules.. . . . . . . . . . . . . . . . . . 9
          1.04.04   Other Agreements.. . . . . . . . . . . . . . . . . . . . . 9
1.05 Pi Energy Corporation.. . . . . . . . . . . . . . . . . . . . . . . . . . 9
     
ARTICLE 2: SALE AND PURCHASE
2.01 Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.02 Purchase Price and Payment. . . . . . . . . . . . . . . . . . . . . . . . 9
2.03 Adjustments to the Purchase Price.. . . . . . . . . . . . . . . . . . . . 9
          2.03.01   Upward Adjustments.. . . . . . . . . . . . . . . . . . . . 9
          2.03.02   Downward Adjustments.. . . . . . . . . . . . . . . . . . .10
2.04 Allocation of Purchase Price. . . . . . . . . . . . . . . . . . . . . . .11
2.05 Transfer of the Assets, Etc.. . . . . . . . . . . . . . . . . . . . . . .11
2.06 Method of Payment.. . . . . . . . . . . . . . . . . . . . . . . . . . . .11

ARTICLE 3: REPRESENTATIONS AND WARRANTIES
3.01 Seller. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
          3.01.01   Organization and Standing. . . . . . . . . . . . . . . . .11
          3.01.02   Authority. . . . . . . . . . . . . . . . . . . . . . . . .12
          3.01.03   Validity of Agreement. . . . . . . . . . . . . . . . . . .12
          3.01.04   No Violation.  . . . . . . . . . . . . . . . . . . . . . .12
          3.01.05   Legal Proceedings. . . . . . . . . . . . . . . . . . . . .12
          3.01.06   Compliance with Applicable Laws. . . . . . . . . . . . . .12
          3.01.07   Contracts. . . . . . . . . . . . . . . . . . . . . . . . .12
          3.01.08   Assets . . . . . . . . . . . . . . . . . . . . . . . . . .13
          3.01.09   Authorizations for Expenditures. . . . . . . . . . . . . .13
          3.01.10   Equipment. . . . . . . . . . . . . . . . . . . . . . . . .13
          3.01.11   Wells. . . . . . . . . . . . . . . . . . . . . . . . . . .14
          3.01.12   Exchange of Equipment. . . . . . . . . . . . . . . . . . .14
          3.01.13   Payout Balances. . . . . . . . . . . . . . . . . . . . . .14
          3.01.14   No Preferential Rights . . . . . . . . . . . . . . . . . .14
          3.01.15   No Consents Required . . . . . . . . . . . . . . . . . . .14
          3.01.16   Prepayment.. . . . . . . . . . . . . . . . . . . . . . . .14
          3.01.17   Payments.  . . . . . . . . . . . . . . . . . . . . . . . .14
          3.01.18   Conduct of Business. . . . . . . . . . . . . . . . . . . .15
          3.01.19   Jaffe Agreement. . . . . . . . . . . . . . . . . . . . . .15
          3.01.20   Losses.. . . . . . . . . . . . . . . . . . . . . . . . . .15
          3.01.21   Changes. . . . . . . . . . . . . . . . . . . . . . . . . .15
          3.01.22   Imbalances . . . . . . . . . . . . . . . . . . . . . . . .15
3.02 Buyer.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
          3.02.01   Organization and Standing. . . . . . . . . . . . . . . . .16
          3.02.02   Authority. . . . . . . . . . . . . . . . . . . . . . . . .16
          3.02.03   Validity of Agreement. . . . . . . . . . . . . . . . . . .16


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          3.02.04   No Violation.. . . . . . . . . . . . . . . . . . . . . . .16
          3.02.05   No Consents Required.. . . . . . . . . . . . . . . . . . .16
          3.02.06   Securities Representation. . . . . . . . . . . . . . . . .16
3.03 Disclaimer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

ARTICLE 4: COVENANTS
4.01 Covenants of Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . .19
          4.01.01   Performance Bonds, Guaranties, Etc.  . . . . . . . . . . .19
          4.01.02   Assumption of Assumed Liabilities. . . . . . . . . . . . .19
4.02 Covenants of Seller and Buyer.. . . . . . . . . . . . . . . . . . . . . .19
          4.02.01   Recording. . . . . . . . . . . . . . . . . . . . . . . . .19
          4.02.02   Brokers. . . . . . . . . . . . . . . . . . . . . . . . . .19
          4.02.03   Certain Filings, Consents and Permits. . . . . . . . . . .19
          4.02.04   Post-Closing Access. . . . . . . . . . . . . . . . . . . .20
          4.02.05   Employee Matters.. . . . . . . . . . . . . . . . . . . . .20
          4.02.06   Final Recapitulation Settlement; Subsequent Audits and
                    Settlements. . . . . . . . . . . . . . . . . . . . . . . .20
          4.02.07   Further Assurances.. . . . . . . . . . . . . . . . . . . .21
          4.02.08   Files Transfer.. . . . . . . . . . . . . . . . . . . . . .21
          4.02.09   Plugging and Abandonment.. . . . . . . . . . . . . . . . .22

ARTICLE 5: TAXES
5.01 Payment and Apportionment of Real Property Taxes and Personal Property
     Taxes.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
          5.01.01   Real and Personal Property Taxes.. . . . . . . . . . . . .22
          5.01.02   Liability and Right to Pursue Claims.. . . . . . . . . . .22
5.02 Other Taxes.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
5.03 Sales Taxes.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
5.04 Tax Proceedings.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
5.05 Purchase Price Allocation.. . . . . . . . . . . . . . . . . . . . . . . .23

ARTICLE 6: ENVIRONMENTAL MATTERS
6.01 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
6.02 Seller Representations. . . . . . . . . . . . . . . . . . . . . . . . . .24
          6.02.01   Disclosure . . . . . . . . . . . . . . . . . . . . . . . .24
          6.02.02   Past Use of Property Interest. . . . . . . . . . . . . . .24
6.03 Seller's Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . .24
6.04 Limitations.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
6.05 Buyer's Responsibilities. . . . . . . . . . . . . . . . . . . . . . . . .25
6.06 Exclusive Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . .25

ARTICLE 7: INDEMNITY
7.01 General Indemnification.. . . . . . . . . . . . . . . . . . . . . . . . .26
          7.01.01   Seller.. . . . . . . . . . . . . . . . . . . . . . . . . .26
          7.01.02   Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . .26


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7.02 Method of Asserting Claims, Etc.. . . . . . . . . . . . . . . . . . . . .27
          7.02.01   Third Person Claims. . . . . . . . . . . . . . . . . . . .27
          7.02.02   Other Claims.. . . . . . . . . . . . . . . . . . . . . . .28
7.03 Payment.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
          7.03.01   Payment of Undisputed Amount.. . . . . . . . . . . . . . .28
          7.03.02   Interest.  . . . . . . . . . . . . . . . . . . . . . . . .28
          7.03.03   Disputed Claims. . . . . . . . . . . . . . . . . . . . . .28

ARTICLE 8: CONDITIONS PRECEDENT
8.01 Conditions Precedent of Buyer.. . . . . . . . . . . . . . . . . . . . . .28
          8.01.01   Representations and Warranties True at Closing.. . . . . .29
          8.01.02   Compliance with Agreement. . . . . . . . . . . . . . . . .29
          8.01.03   Certified Resolutions and Officers' Certificate. . . . . .29
          8.01.04   Injunction.. . . . . . . . . . . . . . . . . . . . . . . .29
          8.01.05   Conveyance.. . . . . . . . . . . . . . . . . . . . . . . .29
          8.01.06   Letters in Lieu. . . . . . . . . . . . . . . . . . . . . .29
          8.01.07   No Material Adverse Change.. . . . . . . . . . . . . . . .29
8.02 Conditions Precedent of Seller. . . . . . . . . . . . . . . . . . . . . .30
          8.02.01   Representations and Warranties True at Closing.. . . . . .30
          8.02.02   Compliance with Agreement. . . . . . . . . . . . . . . . .30
          8.02.03   Certified Resolutions and Officers' Certificate. . . . . .30
          8.02.04   Injunction.. . . . . . . . . . . . . . . . . . . . . . . .30
          8.02.05   Conveyance.. . . . . . . . . . . . . . . . . . . . . . . .30
          8.02.06   Letters in Lieu. . . . . . . . . . . . . . . . . . . . . .30

ARTICLE 9: MISCELLANEOUS
9.01 Notices.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
9.02 Modification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
9.03 Governing Law.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
9.04 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
9.05 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
9.06 Invalidity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
9.07 Entire Agreement and Construction.. . . . . . . . . . . . . . . . . . . .32
9.08 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
9.09 Waivers and Amendments. . . . . . . . . . . . . . . . . . . . . . . . . .32
9.10 Survival of Warranties, Representations and Covenants.  . . . . . . . . .33
9.11 Article Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
9.12 Dispute Resolution. . . . . . . . . . . . . . . . . . . . . . . . . . . .33
          9.12.01   Selection of Arbitrator. . . . . . . . . . . . . . . . . .33
          9.12.02   Qualifications of Arbitrator.. . . . . . . . . . . . . . .33
          9.12.03   Suit Prohibited. . . . . . . . . . . . . . . . . . . . . .34
          9.12.04   Damages. . . . . . . . . . . . . . . . . . . . . . . . . .34
          9.12.05   Decision.  . . . . . . . . . . . . . . . . . . . . . . . .34
          9.12.06   AAA Rules. . . . . . . . . . . . . . . . . . . . . . . . .34


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EXHIBITS AND SCHEDULES
--------------------------------------------------------------------------------
Exhibits and Schedules are described on the pages noted below.

EXHIBITS
Exhibit A (Assignment) . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Exhibit B (Bill of Sale) . . . . . . . . . . . . . . . . . . . . . . . . . . .11

SCHEDULES
Schedule 3.01.05 (Legal Proceedings) . . . . . . . . . . . . . . . . . . . . .12
Schedule 3.01.06 (Non-Compliance With Laws). . . . . . . . . . . . . . . . . .12
Schedule 3.01.07 (Certain Contracts) . . . . . . . . . . . . . . . . . . . . .12
Schedule 3.01.08 (Breaches of Material Contracts). . . . . . . . . . . . . . .13
Schedule 3.01.09 (Pending AFE Items) . . . . . . . . . . . . . . . . . . . . .13
Schedule 3.01.11A (Allowables) . . . . . . . . . . . . . . . . . . . . . . . .14
Schedule 3.01.11B (P&A Obligations). . . . . . . . . . . . . . . . . . . . . .14
Schedule 3.01.12 (Exchange/Removal of Equipment) . . . . . . . . . . . . . . .14
Schedule 3.01.13 (Payout Balances) . . . . . . . . . . . . . . . . . . . . . .14
Schedule 3.01.15 (Consents). . . . . . . . . . . . . . . . . . . . . . . . . .14
Schedule 3.01.18 (Non-Standard Operations) . . . . . . . . . . . . . . . . . .15
Schedule 3.01.19 (Jaffe Contract Balance). . . . . . . . . . . . . . . . . . .15
Schedule 4.02.02 (Brokers and Finders) . . . . . . . . . . . . . . . . . . . .19
Schedule A (Leases). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Schedule B (Easements) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Schedule C (Excluded Facilities) . . . . . . . . . . . . . . . . . . . . . . . 4
Schedule D (Material Contracts). . . . . . . . . . . . . . . . . . . . . . . . 5
Schedule E (Marine Equipment). . . . . . . . . . . . . . . . . . . . . . . . . 6
Schedule F (Excluded Yard Inventory/Equipment) . . . . . . . . . . . . . . . . 6
Schedule G (Property, Accounting Unit, Allocated Value). . . . . . . . . . . . 7



                                      -v-
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                           PURCHASE AND SALE AGREEMENT

     This Agreement dated effective as of February 1, 1997, is made and entered
into by and between REDFISH BAY DEVELOPMENT CORPORATION, a Texas corporation,
and PI ENERGY CORPORATION, a Texas corporation, both having offices at 333 Clay
Street, Suite 4310, Houston, TX 77002 (collectively, jointly and severally,
"Buyer") and MIDLAND RESOURCES, INC., a Texas corporation, and SUMMIT PETROLEUM
CORPORATION, a Colorado corporation, both having offices at 16701 Greens Point
Park Drive, #200, Houston, Texas 77060 (collectively, jointly and severally,
"Seller").

                                    ARTICLE 1
              SUBJECT MATTER, DEFINITIONS AND RULES OF CONSTRUCTION

1.01  SUBJECT MATTER. The subject matter of this Agreement is the sale,
assignment, transfer and conveyance of Seller's and Seller's Affiliates'
interest in the Assets, the purchase of the Assets and the assumption of the
Assumed Liabilities by Buyer, and the terms and conditions upon which the sale
shall take place.

1.02  DEFINITIONS. For purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, the terms defined in this
Article have the meanings herein assigned to them and the capitalized terms
defined elsewhere in this Agreement, by inclusion in quotation marks and
parentheses, shall have the meanings so ascribed to them.

     1.02.01  "AFFILIATE" means, with respect to any specified Person, any 
     other Person directly or indirectly controlling or controlled by or 
     under direct or indirect common control with such specified Person.  For 
     the purposes of this definition, "control" means the power to direct the 
     management and policies of such Person, directly or indirectly, whether 
     through the ownership of voting securities, by contract or otherwise; 
     and the terms "controlling" and "controlled" have meanings correlative 
     to the foregoing, it being understood and agreed that with respect to a 
     corporation, control shall mean a direct or indirect ownership of more 
     than 50 percent of the voting stock.

     1.02.02  "AGREED RATE" means a rate per annum calculated on a 360-day 
     basis which is equal to the lesser of :

          (a)  a rate which is two percent  above the prime rate of interest as
          published by the WALL STREET JOURNAL under the heading "Money Rates"
          or another similar heading in its first issue of each calendar month
          (adjusted each month to reflect any changes in the rate), or 

          (b)  the maximum rate from time to time permitted by applicable Law.

     1.02.03   "AGREEMENT" means this Purchase and Sale Agreement, including the
     Schedules and Exhibits.


                                      -1-
<PAGE>

     1.02.04   "ASSETS" means the Leases, Other Property, Easements, and
     Contracts, but not including the following (the "Excluded Assets"):

          (a)  all trade credits, accounts receivable, notes receivables and
          other receivables attributable to Seller's interest in the Assets with
          respect to any period of time prior to the Effective Date; 

          (b)  all deposits, cash, checks in process of collection, cash
          equivalents and funds attributable to Seller's interest in the Assets
          with respect to any period of time prior to the Effective Date; and 

          (c)  all funds attributable to Third Persons for production prior to
          the Effective Date but suspended or impounded by Seller;

          (d)  all claims and causes of action of Seller 

               (i)  arising from acts, omissions or events, or damage to or
               destruction of property, occurring prior to the Effective Date,
               or 

               (ii) affecting any of the Excluded Assets;

          (e)  except as set forth in Article 4.03.06, all rights, titles,
          claims and interests of Seller 

               (i)   under any policy or agreement of insurance or indemnity; 

               (ii)  under any bond; or 

               (iii) to any insurance or condemnation proceeds or awards;

          (f)  the claims of Seller for refunds of or loss carry forwards with
          respect to 

               (i)   Taxes attributable to any period prior to the Effective
                     Date; or 

               (ii) Taxes attributable to any of the Excluded Assets;

          (g)  all amounts due or payable to Seller as adjustments or refunds
          under any Contracts affecting the Assets, with respect to any period
          prior to the Effective Date, specifically including, without
          limitation, amounts recoverable from audits under operating
          agreements;

          (h)  all amounts due or payable to Seller as adjustments to insurance
          premiums related to the Assets with respect to any period prior to the
          Effective Date;



                                      -2-

<PAGE>


          (i)  all proceeds, benefits, income or revenues accruing (and any
          security or other deposits made) with respect to 

               (i)  the Assets prior to the Effective Date; and 

               (ii) any of the Excluded Assets;

          (j)  any pipelines, easements, fixtures, tanks or equipment located on
          the Assets which belong to Third Persons;

          (k)  records and documents subject to confidentiality provisions,
          claims of privilege, or other restrictions on access, except as
          otherwise expressly provided herein;

          (l)  all corporate, financial, legal and tax records of Seller, except
          as otherwise expressly provided herein; and

          (m)  the Excluded Facilities.

     1.02.05   "ASSUMED LIABILITIES" means:

          (a)  all liabilities, duties, and obligations that arise from
          ownership or operation of the Assets on and after the Effective Date
          or otherwise expressly assumed under this Agreement;

          (b)  liabilities and obligations with respect to Plugging and
          Abandonment;

          (c)  all duties, liabilities and obligations that arise under the
          Contracts (including the Jaffe Agreement defined below) on and after
          the Effective Date.

     1.02.06   "BUSINESS DAY" means any day when commercial banks are generally
     open for regular business in the states of New York and Texas.

     1.02.07   "CLOSING" means the closing of the transactions contemplated by
     this Agreement at 10:00 a.m., local time, at Seller's offices in Houston,
     Texas, on the Closing Date or at such other time or place as the Parties
     may mutually agree upon in writing.

     1.02.08   "CLOSING DATE" means February 28, 1997, subject to extension as
     provided herein, or such other date as the Parties may mutually agree upon
     in writing.

     1.02.09   "CODE" means the United States Internal Revenue Code of 1986, as
     amended.

     1.02.10   "CONTRACTS" means the Material Contracts and the Other Contracts.



                                      -3-

<PAGE>


     1.02.11   "CORPORATE DOCUMENTS" means a corporation's articles of
     incorporation (or certificate of incorporation) and by-laws or the
     equivalent documents.

     1.02.12   "EASEMENTS" means Seller's non-exclusive rights to the use and
     occupancy of the surface (including the surface of submerged lands),
     including, without limitation, tenements, appurtenances, surface leases,
     easements, permits, licenses, servitudes and rights-of-way in any way
     appertaining, belonging, affixed or incidental to or used in connection
     with the ownership or operation of the Leases including, without
     limitation, those set forth on Schedule B.

     1.02.13   "EFFECTIVE DATE" shall mean 7:00 a.m. on February 1, 1997, at the
     location of the Assets.

     1.02.14   "EXCLUDED ASSETS" means the assets excluded from the 
     definition of Assets as stated in Article 1.02.04.

     1.02.15   "EXCLUDED FACILITIES" means Facilities that are:

          (a)  neither located on nor used in connection with the Leases;

          (b)  not located on the Leases or Easements and that are used in
          connection with the Leases or Easements, and Seller's retained
          properties; or

          (c)  identified on Schedule C.

     1.02.16   "FACILITIES" means facilities and equipment that are customarily
     used directly in the production of Hydrocarbons, including, but not limited
     to injection facilities, disposal facilities, field separators, liquid
     extractors, compressors, gathering systems, lines, LACT units, plants,
     platforms, tanks and the like.

     1.02.17   "GOVERNMENTAL BODY" means any federal, state, county, municipal,
     or other federal, state or local governmental authority or judicial or
     regulatory agency, board, body, department, bureau, commission,
     instrumentality, court, tribunal or quasi-governmental authority in any
     jurisdiction (domestic or foreign) having jurisdiction over any Asset or
     Party to this transaction, or any of the transactions or matters
     contemplated by this Agreement.

     1.02.18   "HYDROCARBON INVENTORY" means all processed merchantable oil,
     condensate and natural gas liquids inventories in storage or existing in
     oil stock tanks above the outlet flange delivery point and credited to the
     Assets as of the Effective Date.

     1.02.19   "HYDROCARBONS" means crude oil, natural gas, casinghead gas,
     condensate, sulphur, natural gas liquids, plant products and other liquid
     or gaseous hydrocarbons (of whatever 



                                      -4-

<PAGE>

     nature and kind, including coalbed gas), all other gases (including 
     CO(2)), and all other minerals and gases of every kind and character 
     which may be covered by or included in the Assets.
     
     1.02.20   "IDENTIFICATION DATE" means January 1, 1997.
     
     1.02.21   "INCLUDED FACILITIES" means the Facilities that are
     
          (a)  located on or off of, but used solely in connection with the
     Leases; or
     
          (b)  located entirely on and used in connection with the Leases;
     
     except for the Excluded Facilities.
     
     1.02.22   "KNOWLEDGE" means the actual knowledge of a Party's corporate 
     officers after reasonable inquiry.
     
     1.02.23   "LEASES" means the interests in the oil, gas or mineral leases 
     and other interests set forth on Schedule A.
     
     1.02.24   "LINE FILL" means all Hydrocarbons in lines, gathering 
     systems, plant equipment, treating and separation equipment and 
     gunbarrels located on or allocable to the Assets and occurring prior to 
     the delivery point or outlet flange for liquids or prior to the gas 
     sales meter for gases.
     
     1.02.25   "LOSSES" means any and all losses, costs, expenses, 
     liabilities, claims, demands, penalties, fines, assessments, 
     settlements, damages and any related expenses of whatever kind or 
     nature, or otherwise including, without limitation, legal, accounting, 
     consulting and investigation expenses and litigation costs, but 
     excluding consequential damages of a Party other than losses directly 
     attributable to a cessation or reduction of the production of 
     Hydrocarbons.
     
     1.02.26   "MATERIAL CONTRACTS" means the contracts of Seller material to 
     the Leases and Other Property, and material to the transportation, 
     marketing and processing of Hydrocarbons produced therefrom, listed on 
     Schedule D, insofar and only insofar as they specifically relate to the 
     Leases and Other Property, but specifically excluding Easements and 
     Leases.
     
     1.02.27   "OTHER CONTRACTS" means any contracts, agreements or 
     arrangements of Seller affecting the Leases and Other Property other 
     than the Material Contracts, insofar and only insofar as they 
     specifically relate to the Leases and Other Property, but specifically 
     excluding the Easements and the Leases.
     
     1.02.28   "OTHER PROPERTY" means all of Seller's or its Affiliates' 
     right, title and interest in and to the following, but specifically 
     excluding the Excluded Facilities:


                                      -5-
<PAGE>

          (a)  all wells, equipment, fixtures and personal property of any kind
          located on the  Leases, Easements, or the lands subject to the
          Contracts as of the Identification Date, or used solely in connection
          with the production, separation, storage, treatment, gathering or
          transportation of Hydrocarbons therefrom, including, but not limited
          to, tubing, casing, wellheads, pumping units, production units,
          compressors, valves, meters, pipelines, gathering lines, flowlines,
          tanks, heaters, separators, dehydrators, pumps, injection units, gates
          and fences, pulling machines, warehouse stocks, and microwave
          equipment;

          (b)  the boats, barges, and marine equipment described on Schedule E;

          (c)  except as set forth on Schedule F, yard inventory and yard
          equipment that is charged to or is reasonably chargeable to the
          Leases, or Easements, and which have been used primarily in connection
          with the Leases, Easements, and Contracts;

          (d)  subject to required Third Person consents, all licenses,
          authorizations, permits, variances and similar rights and interests
          related to the Leases, Easements, Contracts, and the property defined
          in (a) through (d) above;

          (e)  subject to Article 4.02.08, the applicable general operating
          records, lease operating statements, well files (including applicable
          well logs and production data), production records, logs, information
          and engineering data relating to the Assets, lease files, land files,
          regulatory reports and certificates, abstracts and title work
          pertaining to the Leases, Easements, Contracts, and property defined
          in (a) through (d) above, but excluding: environmental compliance
          files (other than the portions of such files which pertain to the
          Assets), legal files not pertaining to Assumed Liabilities,
          attorney-client communications or attorney work product materials and
          other similar documents covered by privilege, interpretations of
          technical data, records and documents subject to confidentiality
          provisions, and auditor's reports;

          (f)  Hydrocarbon Inventory and Line Fill;

          (g)  all rights, interests and benefits to gas imbalances with respect
          to the Properties;

          (h)  the Included Facilities;

          (i)  all other rights, privileges, benefits and powers conferred upon
          the owner and holder of the Leases, Easements, and Contracts,  and
          property defined in (a) through (h) above.

     1.02.29   "PARTY" means either Buyer or Seller.

     1.02.30   "PERSON" means any individual, corporation, partnership, limited
     liability company, 


                                      -6-
<PAGE>

     joint venture, association, joint stock company, trust, estate, 
     unincorporated organization, other business entity or any Governmental 
     Body.

     1.02.31   "PLUGGING AND ABANDONMENT" means all plugging and abandonment 
     of wells, and associated removal of Other Property, the removal, capping 
     or burying of all associated flowlines, the restoration of the surface, 
     site clearance, and any disposal of related waste materials, including 
     naturally occurring radioactive material (NORM) and asbestos on the 
     Other Property removed. Plugging and Abandonment does not cover cleanup 
     of polluted lands, air or water other than routine surface cleanup of 
     the drillsite area normally associated with plugging and abandonment.
     
     1.02.32   "PROPERTY" means an accounting unit or property designation as 
     set forth on Schedule G which is utilized by Seller for allocation of 
     revenues and expenses from the associated Leases.
     
     1.02.33   "TAX" means any and all fees (including, without limitation, 
     documentation, license, recording, filing and registration fees), taxes 
     (including without limitation, production, gross receipts, ad valorem, 
     value added, windfall profit tax, environmental tax, turnover, sales, 
     use, property (tangible and intangible), stamp, leasing, lease, user, 
     leasing use, excise, franchise, transfer, heating value, fuel, excess 
     profits, occupational, interest equalization, lifting, oil, gas, or 
     mineral production or severance, and other taxes), levies, imposts, 
     duties, charges or withholdings of any nature whatsoever, imposed by any 
     Governmental Body or taxing authority thereof, domestic or foreign, 
     together with any and all penalties, fines, additions to Tax and 
     interest thereon, whether or not such Tax shall be existing or hereafter 
     adopted.
     
     1.02.34   "THIRD PERSON" means a Person other than a Party or an 
     Affiliate of a Party.
     
1.03 OTHER DEFINITIONS IN THIS AGREEMENT. The following terms shall 
have the respective meanings ascribed to them in the Articles in which 
they are defined, as found on the following pages of this Agreement:

     TERM                                                                   PAGE
     ----                                                                   ----

     Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
     Allocated Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
     Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
     Claim Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
     Deeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
     Disputed Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
     Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
     Environmental Claims. . . . . . . . . . . . . . . . . . . . . . . . . . .23
     Environmental Condition . . . . . . . . . . . . . . . . . . . . . . . . .23
     Environmental Law . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
     Environmental Matter. . . . . . . . . . . . . . . . . . . . . . . . . . .24


                                      -7-
<PAGE>

     Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
     Final Recap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
     Final Recap Statement . . . . . . . . . . . . . . . . . . . . . . . . . .20
     Indemnified Party . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
     Indemnifying Party. . . . . . . . . . . . . . . . . . . . . . . . . . . .27
     Jaffe Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
     Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
     Notice Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
     Property Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
     Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
     Real and Personal Property Taxes. . . . . . . . . . . . . . . . . . . . .22
     Remediation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
     Remediation Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . .24

1.04 RULES OF CONSTRUCTION.  For purposes of this Agreement:

     1.04.01   GENERAL.  Unless the context otherwise requires 

          (a)  "or" is not exclusive; 

          (b)  an accounting term not otherwise defined has the meaning assigned
          to it in accordance with accounting principles that are generally
          accepted in the United States of America; 

          (c)  words in the singular include the plural and words in the plural
          include the singular; 

          (d)  words in the masculine include the feminine and words in the
          feminine include the masculine; 

          (e)  any date specified for any action that is not a Business Day
          shall be deemed to mean the first Business Day after such date; and 

          (f)  a reference to a Person includes its successors and assigns.

     1.04.02   ARTICLES.  References to Articles are, unless otherwise 
     specified, to Articles of this Agreement.  Neither the captions to Articles
     nor the Table of Contents shall be deemed to be a part of this Agreement.

     1.04.03   EXHIBITS AND SCHEDULES.  The Exhibits and Schedules form part of
     this Agreement and shall have the same force and effect as if set out in
     the body of this Agreement.

     1.04.04   OTHER AGREEMENTS.  References herein to any agreement or other
     instrument shall, 


                                      -8-
<PAGE>

     unless the context otherwise requires (or the definition thereof 
     otherwise specifies), be deemed references to that agreement or 
     instrument as it may from time to time be changed, amended or extended. 
     There is no incorporation by reference unless stated.
     
1.05 PI ENERGY CORPORATION.  Pi Energy Corporation joins in this Agreement as
Seller only for assuring and guaranteeing to Seller the performance of all of
Buyer's covenants, agreements, and obligations under this Agreement; Pi Energy
Corporation shall not have any right, title, or interest in the Assets.

                                    ARTICLE 2
                                SALE AND PURCHASE

2.01 ASSETS.  At the Closing, Seller shall and shall cause its Affiliates to
sell, assign, transfer and convey to Redfish Bay Development Corporation the
Assets and Buyer shall purchase and pay for the Assets and assume the Assumed
Liabilities.

2.02 PURCHASE PRICE AND PAYMENT.  The purchase price shall be $1,725,000.00,
adjusted pursuant to Article 2.03 ("Purchase Price").

2.03 ADJUSTMENTS TO THE PURCHASE PRICE.  The Purchase Price shall be adjusted as
follows:

     2.03.01   UPWARD ADJUSTMENTS.  The Purchase Price shall be adjusted upward
     by the following:

          (a)  the amount of all direct costs and expenditures chargeable to
          Seller's interest incurred and paid by or on behalf of Seller
          (including prepayments of expenditures) that are attributable to

               (i)   the drilling, completion, recompletion, reworking, 
               operation and maintenance of the Assets on and after the 
               Effective Date, 

               (ii)  bonuses, lease rentals and shut-in payments due after (and
               expressly excluding those due before) the Effective Date, 

               (iii) ad valorem, property and other Taxes that are allocated 
               to the Buyer pursuant to Article 5, and 

               (iv)  amounts relating to obligations arising under the Contracts
               with respect to operations or production after the Effective
               Date;

          (b)  the value (based on the average December 1996 sales price from
          the Properties) of the Hydrocarbon Inventory net of all Taxes and
          Burdens, and less an appropriate deduction based on industry practice
          for basic sediment, water and other 


                                      -9-
<PAGE>

          non-merchantable liquids;

          (c)  the payments received by Seller from Third Persons for overhead
          under operating agreements for operations conducted during the period
          after the Effective Date;

          (d)  any other amount agreed upon by Seller and Buyer.

     2.03.02   DOWNWARD ADJUSTMENTS.  The Purchase Price shall be adjusted
     downward by the following:

          (a)  the amount of all proceeds received by Seller that are
          attributable to the ownership and operation of the Assets on or after
          the Effective Date, including, without limitation gross proceeds (net
          of Burdens) for Hydrocarbons sold; and

          (b)  the amount of 

               (i)   all direct unrelated Third Person costs and expenditures
               chargeable to Seller's interest and not paid by Seller that are
               attributable to the drilling, completion, recompletion,
               reworking, operation and maintenance of the Assets prior to the
               Effective Date, 

               (ii)  all bonuses, lease rentals and shut-in payments due prior 
               to the Effective Date and not paid by Seller, and 

               (iii) amounts relating to obligations arising under the 
               Contracts, and COPAS charges all with respect to operations and
               production prior to the Effective Date and not paid by Seller and
               paid or assumed by Buyer;

          (c)  the amount of the Phase One Development Fund that remains unspent
          under the terms of the Jaffe Agreement (defined below), as stated on
          Schedule 3.01.19; and

          (d)  any other amount agreed upon by Seller and Buyer.

     2.03.03   NO ADJUSTMENT.  The Purchase Price shall not be adjusted with
     respect to the failure  to install storm chokes as disclosed in Schedule
     3.01.06.

2.04 ALLOCATION OF PURCHASE PRICE.  Schedule G sets forth an allocation of the
Purchase Price among Properties and other designated items that comprise the
Assets, which allocation was prepared by Buyer (the "Allocated Value").  The
allocation has been provided for the purpose of establishing a basis for certain
Taxes, and for making adjustments under this Agreement.  If necessary to
determine the Allocated Value of a portion of any Property for which an
Allocated Value is set forth on Schedule G, Seller's engineering performed prior
to the execution of this Agreement and used to 


                                      -10-
<PAGE>

establish the Allocated Value for the entire Property (if any) shall govern 
the allocation to such portion, and if no such engineering was performed, 
such allocation shall be determined on a reasonable engineering basis 
consistent with the evaluation implicit in the Allocated Value shown on 
Schedule G.

2.05 TRANSFER OF THE ASSETS, ETC.  At the Closing, Seller and Buyer shall
execute and acknowledge, and Seller shall deliver, an assignment in the form of
Exhibit A (the "Assignment"), the bill of sale which is contained in Exhibit B
(the "Bill of Sale"), as well as such certificates or other documents as are
required to effect the transfer of the Assets, or the subsequent operation
thereof.  Buyer and Seller shall also execute and deliver such change of
operator forms as are required by applicable Governmental Bodies to transfer
operatorship of the Assets to Buyer.

2.06 METHOD OF PAYMENT.  Any amount payable under this Agreement shall be
payable in immediately available funds by means of a wire transfer, if to
Seller, to Seller's account at First Union National Bank, ABA # 053-000-219, for
the benefit of Midland Resources, Inc., account number 2000000482590 (with
immediate telephone notice to Mr. Ric Miller, telephone number (713) 873-4828,
or if to Buyer, to Buyer's account as may be designated by Buyer.

                                    ARTICLE 3
                         REPRESENTATIONS AND WARRANTIES

3.01 SELLER.  Seller represents and warrants to Buyer that:

     3.01.01  ORGANIZATION AND STANDING.  Seller has been duly organized, 
     validly existing in good standing under the laws of the State of Texas and
     is in good standing as a foreign corporation in all jurisdictions where the
     nature of its properties or business requires it.

     3.01.02  AUTHORITY.  Seller has the corporate power and authority to enter
     into and perform this Agreement and to consummate the transactions
     contemplated hereby.  The execution, delivery and performance by Seller of
     this Agreement and the consummation of the transactions contemplated hereby
     have been duly authorized by all requisite corporate action and this
     Agreement has been duly executed and delivered by Seller.

     3.01.03  VALIDITY OF AGREEMENT.  This Agreement is a legal, valid and
     binding obligation of Seller enforceable against Seller in accordance with
     the terms of this Agreement, except as enforcement may be limited by
     bankruptcy, insolvency or other similar Laws affecting the enforcement of
     creditors' rights in general.  The enforceability of Seller's obligations
     under this Agreement is subject to general principles of equity (regardless
     of whether such enforceability is considered in a proceeding in equity or
     at law).

     3.01.04  NO VIOLATION.  The execution and delivery of this Agreement and 
     the performance by the Seller of the terms of this Agreement do not 
     conflict with or result in a violation of the Corporate Documents of Seller
     or any agreement, instrument, order, writ, judgment or decree 


                                      -11-
<PAGE>

     to which Seller is a party or is subject.

     3.01.05  LEGAL PROCEEDINGS.  Except as set forth on Schedule 3.01.05, as of
     the date of this Agreement, there are no pending suits, actions,
     arbitrations, mediations or proceedings as to which Seller has been served
     process or received notice before any court or Governmental Body which
     would adversely affect the Assets, or hinder, impede or prevent Seller from
     consummating the transactions contemplated by this Agreement.  To Seller's
     Knowledge, there are no pending suits, actions, arbitrations, mediations or
     proceedings as to which Seller has not been served process or received
     notice, or that are threatened before any court or Governmental Body which
     would adversely affect the Assets, or hinder, impede or prevent Seller from
     consummating the transactions contemplated by this Agreement.

     3.01.06  COMPLIANCE WITH APPLICABLE LAWS.  Except as set forth on Schedule
     3.01.06, Seller, in the operation of those Assets that Seller operates and,
     to Seller's Knowledge, the operator in the case of those Assets Seller does
     not operate, is in compliance with any applicable laws, orders, rules,
     regulations, judgments or decrees of any Governmental Bodies, including the
     common or civil law, including but not limited to those relating to
     occupational safety and health, consumer product safety, employee benefits,
     environmental laws, zoning laws or regulations or other applicable laws or
     regulations ("Laws").

     3.01.07  CONTRACTS.  Except as set forth on Schedule 3.01.07, the Assets 
     are not subject to:

          (a)  any instrument or agreement evidencing or related to indebtedness
          for borrowed money, whether directly or indirectly; or 

          (b)  any agreement not entered into in the ordinary course of
          business.

     3.01.08  ASSETS.  With respect to the Assets, 

          (a)  all Material Contracts are to Seller's Knowledge in full force
          and effect and are the valid and legally binding obligations of the
          parties thereto and are enforceable in accordance with their
          respective terms; 

          (b)  Seller is not in material breach or default with respect to any
          of its obligations pursuant to any such Material Contract; 

          (c)  all payments (including, without limitation, valid calls for
          advance payment under unit or operating agreements) due by Seller
          thereunder have been made by Seller; 

          (d)  to Seller's Knowledge, and except to the extent stated in
          Schedule 3.01.08, no other party to any Material Contract relating to
          any Asset is in material breach or default with respect to any of its
          obligations thereunder to the extent such breach or 


                                      -12-
<PAGE>

          default would have a material adverse impact on Seller or any of the 
          Assets; and 

          (e)  neither Seller nor, to Seller's Knowledge, any other party to any
          Material Contract has given notice of any action to terminate, cancel,
          rescind, or procure a judicial reformation of a Material Contract or
          any provision thereof.  

     3.01.09  AUTHORIZATIONS FOR EXPENDITURES.  Except as set forth on 
     Schedule 3.01.09,

          (a)  there are no outstanding calls under Authorizations for
          Expenditures for payments which are due or which Seller has committed
          to make which have not been made; 

          (b)  there are no material operations with respect to which Seller has
          become a non-consenting party where the effect of such non-consent is
          not disclosed on Schedule G, and 

          (c)  there are no commitments for the expenditure of funds for
          drilling or other capital projects other than projects with respect to
          which the operator is not required under the applicable operating
          agreement to seek consent.

     3.01.10  EQUIPMENT.  All equipment and machinery used by Seller to operate
     the Assets has been maintained in accordance with good oil field practices
     and past practices in the field and to Seller's Knowledge all other
     equipment and machinery used by Third Persons to operate the Assets has
     been so maintained.

     3.01.11  WELLS.  Except to the extent set forth on Schedule 3.01.11A, to
     Seller's Knowledge, no well included in the Assets is subject to penalties
     on allowables because of any overproduction or any other violation of
     applicable Laws.  Since the Identification Date, Seller has not, except in
     the reasonable and fair conduct of operations, increased the rate of
     production from the Properties from prior average rates, or depleted the
     Line Fill. Except for the wells listed in Schedule 3.01.11B, there are
     no wells located on the Leases that Seller or operator is currently 
     obligated by order of any Governmental Body to plug and abandon within a 
     time certain.

     3.01.12  EXCHANGE OF EQUIPMENT.  Except as set forth in Schedule 3.01.12,
     since the Identification Date with respect to each of the Assets, 

          (a)  Seller has not exchanged any Other Property for property of
          lesser value, and 

          (b)  Seller has not removed any idle or other equipment or inventory
          from the Assets.

     3.01.13  PAYOUT BALANCES.  The payout balances (or expenditure balances)
     with respect to 


                                      -13-
<PAGE>

     any of the Contracts or any of the Assets that are subject to future 
     change on account of reversionary interests, non-consent penalties or 
     similar agreements or arrangements are set forth on Schedule 3.01.13 and 
     are correct as of the dates shown on such statements.

     3.01.14  NO PREFERENTIAL RIGHTS.  The Assets are free of any preferential
     rights to purchase, rights of first refusal, required consents to assign,
     maintenance of uniform interest clause, or similar restrictions,
     conditions, or requirements for an effective and unrestricted transfer of
     the Assets to Buyer.

     3.01.15  NO CONSENTS REQUIRED.  Except as set forth on Schedule 3.01.15 and
     except for consents and filings required from Governmental Bodies as part
     of an ordinary course transfer, no consents, approvals or other action by,
     or filing with any Person or Governmental Body is required in connection
     with the execution, delivery and performance by Seller of this Agreement.

     3.01.16  PREPAYMENT.  Seller has not received any payments by virtue of a
     prepayment arrangement under any Contract (or entered into a prepayment
     arrangement) for the sale of Hydrocarbons, of a production payment or of
     any other arrangement (other than gas balancing arrangements), which would
     obligate Seller to deliver Hydrocarbons produced from the Assets at some
     future time without receiving full payment therefor.

     3.01.17  PAYMENTS.  To Seller's Knowledge, all payments of any kind
     required to be made by Seller to Third Persons or an Affiliate of Seller
     under any Contract or otherwise with respect to the Assets have been
     properly and timely paid, except for any such payments which are being
     contested in good faith.

     3.01.18  CONDUCT OF BUSINESS.  Except as set forth on Schedule 3.01.18,
     limited to Seller's knowledge as to Assets relating to Leases of which
     Seller is not the operator and not so limited as to the remainder of the
     Assets, since the Identification Date the Assets have been operated in
     accordance with good oilfield practices consistent with past practices and
     in the ordinary course of business.

     3.01.19  JAFFE AGREEMENT.  That certain Purchase and Sale Agreement,
     Stipulation of Interest and Development Agreement between Midland
     Resources, Inc. and Jaffe Energy, Inc. et al. dated February 14, 1995 (the
     "Jaffe Agreement"), remains in force and effect and, to the Knowledge of
     Seller, neither Assignee nor Assignors (as identified in the Jaffe
     Agreement) are in material default of any of its covenants, conditions,
     representations or warranties.  None of the Assignors has asserted any
     breach of the Jaffe Agreement by Assignee.  Assignee has properly spent the
     Phase One Development Fund (as defined in the Jaffe Agreement) under the
     terms of the Jaffe Agreement and in accordance with the Phase One
     Development Plan (as defined in the Jaffe Agreement), except to the extent
     of the outstanding balance identified on Schedule 3.01.19 attached to this
     Agreement.  Buyer has the right to assume the Jaffe Agreement without
     condition. The Effective Date of the Jaffe Agreement is April 10, 

                                      -14-

<PAGE>

     1995, and Buyer, as assignee of the Jaffe Agreement, has until 7:00 a.m. 
     on April 10, 1997, to complete expenditure of the Phase One Development 
     Fund.

     3.1.20   LOSSES.   Since the Effective Date, no material portion of any
     Asset has been destroyed by fire or other casualty, taken in condemnation
     or under the right of eminent domain, and no proceedings for such purposes
     are pending or threatened.

     3.1.21   CHANGES.  Since the Effective Date Seller has not: waived or
     compromised any rights or claims in excess of $10,000 with respect to the
     Assets; incurred any material obligations or liabilities with respect to
     the Assets; entered into any new material agreements or commitments with
     respect to the Assets; abandoned any property which includes Leases and is
     capable of producing Hydrocarbons in paying quantities; modified in any
     material respect any of the Leases or the Material Contracts; encumbered,
     sold or otherwise disposed of an of the Assets, other than Other Property
     which is replaced by equivalent property or which is consumed in normal
     operations; made or obligated itself to make any single expenditure for
     Seller's interest on any well in excess of $10,000 other than expenditures
     that are permitted under existing applicable operating agreements;
     accelerated the rate of production from the Leases other than in the
     ordinary course of business and consistent with standard oilfield
     practices; or diminished the Hydrocarbons used for Line Fill from the
     quantities present at the time the assets were identified for sale or
     thereafter otherwise than in the ordinary course of business and consistent
     with standard oilfield practices.

     3.1.22   IMBALANCES. There is no imbalance in the production, delivery, and
     sale of Hydrocarbons from the Leases, whether at the wellhead, at a plant,
     at a pipeline interconnect, or otherwise.  Seller is entitled to share
     according to its interest of record in the production, delivery, and sale
     of all Hydrocarbons produced from the Leases.

3.2  BUYER.  Buyer represents and warrants to Seller that:

     3.2.1   ORGANIZATION AND STANDING.  Buyer has been duly organized, validly
     existing in good standing under the laws of the State of Texas and is in
     good standing as a foreign corporation in all jurisdictions where the
     nature of its properties or business requires it and is duly qualified to
     own Texas State leases, or will so qualify in the course of accepting the
     Assignment.

     3.2.2   AUTHORITY.  Buyer has the corporate power and authority to enter
     into and perform this Agreement and to consummate the transactions
     contemplated hereby.  The execution, delivery and performance by Buyer of
     this Agreement and the consummation of the transactions contemplated hereby
     have been duly authorized by all requisite corporate action and this
     Agreement has been duly executed and delivered.

     3.2.3   VALIDITY OF AGREEMENT.  This Agreement is a legal, valid and
     binding obligation of Buyer enforceable against Buyer in accordance with
     the terms of this Agreement, except as


                                      -15-
<PAGE>

     enforcement may be limited by bankruptcy, insolvency or other similar 
     Laws affecting the enforcement of creditors' rights in general.  The 
     enforceability of Buyer's obligations under this Agreement is subject 
     to general principles of equity (regardless of whether enforceability is 
     considered in a proceeding in equity or at law).

     3.2.4   NO VIOLATION.  The execution and delivery of this Agreement and the
     performance by Buyer of the terms of this Agreement do not conflict with or
     result in a violation of the Corporate Documents of Buyer or of any
     agreement, instrument, order, writ, judgment or decree to which Buyer is a
     party or is subject.

     3.2.5   NO CONSENTS REQUIRED.  No consents, approvals or other action by,
     or filing with any Person or Governmental Body is required in connection
     with the execution, delivery and performance by Buyer of this Agreement.

     3.2.6   SECURITIES REPRESENTATION.  Buyer is an experienced and
     knowledgeable investor and operator in the oil and gas business and is
     acquiring the Assets for Buyer's own account and not with a view to, or for
     offer of resale in connection with, a distribution thereof, within the
     meaning of the Securities Act of 1933.

3.3  DISCLAIMER.  THERE ARE NO WARRANTIES, REPRESENTATIONS OR IMPLIED COVENANTS
BETWEEN THE PARTIES EXCEPT THE MATTERS EXPRESSLY PROVIDED FOR IN THIS AGREEMENT
AND THE EXHIBITS AND SCHEDULES ATTACHED HERETO AND THE DOCUMENTS, CONVEYANCES
AND INSTRUMENTS TO BE DELIVERED BY THE PARTIES AT AND AFTER CLOSING.  THE
PARTIES RESPECTIVELY DISCLAIM ANY OTHER WARRANTIES OR REPRESENTATIONS INCLUDING,
WITHOUT LIMITATION, ANY WARRANTIES AND REPRESENTATIONS IMPLIED UNDER ANY STATUTE
OR LAW.  EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT:

     3.3.1   ALL THE INFORMATION, STATISTICS, SUMMARIES, AND FACSIMILES
     FURNISHED BY OR ON BEHALF OF SELLER HEREWITH, HEREUNDER, OR PRIOR TO THE
     EXECUTION OF THIS AGREEMENT ARE FURNISHED OR WILL BE FURNISHED FOR BUYER'S
     USE AT BUYER'S SOLE RISK. ALL SUCH INFORMATION HAS BEEN COMPILED OR
     PREPARED BY SELLER BASED UPON ITS FILES AND RECORDS AND SUCH INFORMATION IS
     BELIEVED TO BE CORRECT, BUT SELLER MAKES NO REPRESENTATION, EXPRESS OR
     IMPLIED, AS TO THE ACCURACY, CORRECTNESS, COMPLETENESS, OR THE ADEQUACY OF
     SAME AND DOES NOT WARRANT OR GUARANTEE SUCH INFORMATION IN ANY WAY. SELLER
     HAS MADE NO STATEMENTS OR REPRESENTATIONS CONCERNING THE PRESENT OR FUTURE
     VALUE OF THE ANTICIPATED INCOME, COSTS, OR PROFITS, IF ANY, TO BE DERIVED
     FROM THE PROPERTIES. BUYER IS RESPONSIBLE FOR MAKING SUCH INDEPENDENT
     INVESTIGATION AND EVALUATION OF THE PROPERTIES AS BUYER SHALL DEEM
     APPROPRIATE, REALIZING THAT SELLER DOES NOT ASSUME AND SHALL


                                      -16-
<PAGE>

     HAVE NO LIABILITY TO BUYER OR ANY OTHER PARTY FOR ANY RELIANCE WHICH MAY 
     BE PLACED ON THE INFORMATION, STATISTICS, SUMMARIES, OR FACSIMILES 
     FURNISHED HEREWITH OR HEREUNDER OR ANY STATEMENTS MADE HEREIN. 
     SPECIFICALLY, BUT WITHOUT LIMITING THE GENERALITY OF THE FOREGOING:

          (a)  THE DESCRIPTION OF LEASES INCLUDED IN THE PROPERTIES, THE ACREAGE
          PURPORTED TO BE COVERED THEREBY, DEPTH LIMITATIONS (IF ANY), ROYALTY
          AND OTHER BURDENS AFFECTING SAME, AND QUANTUM OF INTEREST HAVE BEEN
          DERIVED STRICTLY FROM SELLER'S RECORDS AND SELLER HAS NOT UNDERTAKEN
          ANY EXAMINATION OF TITLE TO VERIFY SAME, SELLER WARRANTS TITLE TO THE
          PROPERTIES ONLY AS TO ANY CLAIMS BROUGHT BY, THROUGH, OR UNDER SELLER,
          BUT NOT OTHERWISE, AND BUYER SHOULD THEREFORE UNDERTAKE SUCH TITLE
          EXAMINATION AS IT DEEMS APPROPRIATE PRIOR TO CLOSING; AND

          (b)  ANY DESCRIPTION OF WELLS AND EQUIPMENT INCLUDED IN THE PROPERTIES
          HAS BEEN COMPILED STRICTLY FROM SELLER'S RECORDS, RATHER THAN FROM AN
          ON-THE-GROUND INVENTORY. PRIOR TO CLOSING, BUYER SHOULD UNDERTAKE SUCH
          INSPECTION OR INVENTORY AS IT DEEMS APPROPRIATE TO DETERMINE WHETHER
          THE EQUIPMENT SO DESCRIBED IS IN FACT IN PLACE.

     3.3.2   SELLER MAKES NO WARRANTY OR REPRESENTATION WHATSOEVER AS TO THE
     REGULATORY STATUS OF THE PROPERTIES, AND BUYER SHOULD SATISFY ITSELF AS TO
     SUCH MATTERS PRIOR TO CLOSING. 

     3.3.3   CONVEYANCE OF THE PROPERTIES WILL BE MADE WITHOUT WARRANTIES,
     EXPRESS OR IMPLIED IN FACT OR IN LAW, AS TO MERCHANTABILITY, DURABILITY,
     USE, OPERATION, FITNESS FOR ANY PARTICULAR PURPOSE, CONDITION, OR SAFETY OF
     THE PROPERTIES, COMPLIANCE WITH REGULATORY AND ENVIRONMENTAL REQUIREMENTS
     OR OTHERWISE. 

     3.3.4   BUYER HEREBY AGREES THAT IT HAS INSPECTED OR BEEN GIVEN THE
     OPPORTUNITY TO INSPECT THE PROPERTIES, INCLUDING, WITHOUT LIMITATION, THE
     LEASES AND THE CONTRACTS, WELLS, PERSONAL PROPERTY, AND EQUIPMENT ASSIGNED
     AND CONVEYED HEREIN AND THAT IT ACCEPTS THE SAME "AS IS" AND "WITH ALL
     FAULTS." BUYER RELEASES SELLER FROM LOSSES (AS DEFINED HEREIN) WITH RESPECT
     TO THE PROPERTIES, WHETHER OR NOT CAUSED BY OR ATTRIBUTABLE TO SELLER'S
     NEGLIGENCE AND WHETHER OR NOT ARISING FROM OR IN CONNECTION


                                      -17-
<PAGE>

     WITH OR DURING THE PERIOD OF SELLER'S OWNERSHIP, OPERATION, OR USE OF 
     THE PROPERTIES.  WITHOUT LIMITING THE ABOVE, BUYER WAIVES ITS RIGHT TO 
     RECOVER FROM SELLER AND FOREVER RELEASES AND DISCHARGES SELLER FROM ANY 
     AND ALL LOSSES, PENALTIES, FINES, LIENS, JUDGMENTS, COSTS AND EXPENSES 
     WHATSOEVER (INCLUDING, WITHOUT LIMITATION, ATTORNEY FEES AND COSTS), 
     WHETHER DIRECT OR INDIRECT, KNOWN OR UNKNOWN, FORESEEN OR UNFORESEEN, 
     THAT MAY ARISE ON ACCOUNT OF OR IN ANY WAY BE CONNECTED WITH THE 
     PHYSICAL CONDITION OF THE PROPERTIES OR ANY LAW OR REGULATION 
     APPLICABLE THERETO, INCLUDING, WITHOUT LIMITATION, THE COMPREHENSIVE 
     ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT OF 1980, AS 
     AMENDED (42 U.S.C. 9601 ET. SEQ.), THE RESOURCE CONVERSATION AND 
     RECOVERY ACT OF 1976 (42 U.S.C. 6901 ET. SEQ)., THE CLEAN WATER ACT (33 
     U.S.C. 466 ET. SEQ.), THE SAFE DRINKING WATER ACT (14 U.S.C. 1401-1450), 
     THE HAZARDOUS MATERIALS TRANSPORTATION ACT (49 U.S.C. 1801 ET. SEQ.), THE 
     TOXIC SUBSTANCE CONTROL ACT (16 U.S.C. 2601-2629) AND ALL APPLICABLE STATE
     OR LOCAL LAWS. 

     3.3.5   BUYER AND SELLER WAIVE ANY RIGHT, CLAIM, LOSS, OR DAMAGE UNDER THE
     TEXAS DECEPTIVE TRADE PRACTICES ACT RELATING TO THIS AGREEMENT OR ITS
     NEGOTIATION, EXECUTION, OR PERFORMANCE.

                                    ARTICLE 4
                                    COVENANTS

4.1  COVENANTS OF BUYER.  Buyer covenants with Seller as follows:

     4.1.1   PERFORMANCE BONDS, GUARANTIES, ETC.  With respect to any surety
     bonds, performance bonds, guarantees or financial assurances relating to
     the Assets, on which Seller or its Affiliates are principals or guarantors,
     Buyer shall cause such surety bonds, performance bonds, guarantees or
     financial assurances to be replaced or otherwise released within 90 days
     after the Closing Date.  Buyer shall reimburse Seller for any amounts paid
     by Seller with respect to such surety bonds, performance bonds, guarantees
     or financial assurances related to periods on and after the Closing Date
     until replaced by Buyer's instruments.

     4.1.2   ASSUMPTION OF ASSUMED LIABILITIES.  At the Closing, with effect as
     of the Effective Date, Buyer shall assume the Assumed Liabilities.

4.2  COVENANTS OF SELLER AND BUYER.  Seller and Buyer covenant to each other as
follows:

     4.2.1   RECORDING.  Buyer shall be solely responsible for promptly
     recording the Assignments, Deeds, and any other documents related to the
     conveyance of the Assets, at Buyer's expense, and shall promptly furnish
     Seller with the recording information.  Seller shall


                                      -18-
<PAGE>

     cooperate fully in the preparation and execution of, and Buyer shall be 
     responsible for preparing and making, all filings with state and 
     federal agencies for change of operator, and shall promptly provide 
     Buyer with the original approved copies of all such filings, or 
     confirmation thereof.  All governmental office recording and filing 
     fees shall be paid by Buyer. 

     4.2.2   BROKERS.  The Parties represent to each other, that no broker,
     finder, financial advisor or similar person has been retained by a Party
     except as set forth in Schedule 4.02.02.

     4.2.3   CERTAIN FILINGS, CONSENTS AND PERMITS. Buyer and Seller shall
     cooperate with one another in: 

          (a)  determining whether any filings are required to be made or
          consents, approvals, permits or authorizations are required to be
          obtained under any  Laws; and      

          (b)  making any such filings, furnishing information required in
          connection therewith and seeking timely to obtain any such consents,
          permits, authorizations, approvals or waivers.

     4.2.4   POST-CLOSING ACCESS.  Except as otherwise expressly provided
     herein, from and after the Closing Date, Buyer and Seller shall reasonably
     cooperate and afford each other or cause to be afforded to their respective
     officers, employees, accountants and other representatives access, upon
     reasonable notice, during business hours, to review and copy the books,
     documents, databases or other records relating to the Assets, not including
     the Excluded Assets, (and the Parties shall cooperate and assist one
     another in identifying and locating such books, documents, databases,
     records, or employees files or other information the Parties), interview,
     depose or seek testimony of employees, provide assistance in proceedings
     with employees as witnesses or advisors, investigate the physical premises,
     take photographs or videotapes, identify employees and contractors with
     knowledge of any matter which is the subject of a claim for which a Party
     has responsibility and make such employees available to such Party and
     provide reasonable office space to do any of the foregoing in connection
     with any matter affecting or alleged to affect the Party requesting such
     access.  

     4.2.5   EMPLOYEE MATTERS.  Buyer shall have the right to solicit the field
     employees of Seller who work directly on or in connection with the Assets
     ("Employees"), and shall have the right to offer employment to and hire any
     such Employees. 

     4.2.6   FINAL RECAPITULATION SETTLEMENT; SUBSEQUENT AUDITS AND SETTLEMENTS.
     With respect to final recapitulation and audits;

          (a)  During the 60 days following the Closing Date, Seller and Buyer
          shall each have the right, during normal business hours, to audit,
          inspect, and copy the books and records of the other relating to the
          Assets and production and sale of Hydrocarbons from the Assets.


                                      -19-
<PAGE>

          (b)  Within 60 days after the Closing Date, Seller shall provide to
          Buyer, for Buyer's review, a proposed final recapitulation settlement
          in the form of the Preliminary Settlement Statement (the "Final Recap
          Statement") to account for all adjustments to the Purchase Price known
          as of such date pursuant to Article 2.03 (the "Final Recap").  Buyer
          shall have the right, within 30 days after receipt of the Final Recap
          Statement, to audit the Final Recap Statement.  If Buyer disagrees
          with the Final Recap Statement, Buyer and Seller shall use best
          efforts to reach agreement within 15 days following Buyer's audit of
          the Final Recap Statement.

          (c)  Should the Parties be unable to resolve any disagreements, such
          disagreement shall, at the earliest practicable date, be referred, by
          either or both of the Parties, to a mutually acceptable accounting
          firm (the "Accounting Firm"), along with all audit reports, work
          papers, schedules and calculations related to the matter in dispute. 
          Within 25 days after such submission, the Accounting Firm shall issue
          a letter report determining the Final Recap, which shall be final and
          binding.  Any fees and expenses incurred in resolving disputes shall
          be borne equally by the Parties.

          (d)  Payment of any amounts owed under the Final Recap is due 30 days
          from the date Seller and Buyer agree on the Final Recap Statement, or
          ten days from the determination of the Final Recap by the Accounting
          Firm, whichever is later.  Interest will be applied at the Agreed Rate
          to any amounts if not paid when due.

          (e)  Following the Closing

               (i)  revenue received by either Party that belongs to the other
               Party shall be remitted to the other Party at least monthly, and 

               (ii) invoices received by a Party that are the obligation of the
               other Party shall be forwarded to the other Party within ten days
               of receipt of the invoice.

     4.2.7   FURTHER ASSURANCES.  Each Party shall, from time to time at the
     request of the other, and without further consideration, execute and
     deliver such other instruments of sale, transfer, conveyance, assignment,
     clarification and termination and take such other action as the Party
     making the request may reasonably require to effect the intentions of the
     Parties, including those required to sell, transfer, convey and assign to,
     and vest in Buyer, and to place Buyer in possession of the Assets and to
     transfer, assign or convey the Excluded Assets to Seller.  Seller intends
     to convey the Assets at Closing; however, in the event it is determined
     after Closing that: 

          (a)  any part of the Assets was not in fact conveyed to Buyer, and
          that the title to any part of the Assets is incorrectly in the name of
          Seller; or


                                      -20-
<PAGE>

          (b)  any Excluded Asset is conveyed to Buyer and that the title to
          such Excluded Asset is incorrectly in the name of Buyer; 

     then each Party shall take all such action reasonably necessary to
     correctly convey any part of Assets to Buyer, or any part of the Excluded
     Assets to Seller.

     4.2.8   FILES TRANSFER.  Seller shall deliver, at Seller's premises within
     15 days after the Closing Date, the originals of all the files and records
     described in item (e) set forth in the definition of Other Property except
     where such original files also relate to a property retained by Seller, in
     which case Seller shall deliver copies of such files and shall provide
     Buyer with access to the original files as reasonably requested by Buyer
     (but Buyer shall always receive the originals of well logs for the wells
     completed or attempted to be completed within depths included within the
     Assets).  In the event Seller has delivered originals of files to Buyer,
     Seller shall have the right to make copies of all originals.  Seller and
     Buyer shall be equally responsible for the cost of copying these materials.
     BUYER SHALL ACCEPT ALL FILES AND RECORDS DESCRIBED IN ITEM (e) OF THE
     DEFINITION OF OTHER PROPERTY WITHOUT ANY WARRANTY OR REPRESENTATION
     REGARDING ACCURACY OR CORRECTNESS THEREOF.

     4.2.9   PLUGGING AND ABANDONMENT.  Upon Closing, Buyer shall assume all of
     Seller's Plugging and Abandonment obligations associated with the Assets as
     of the Effective Date and shall conduct such Plugging and Abandonment
     operations in compliance with applicable Laws and in a good and workmanlike
     manner.

                                    ARTICLE 5
                                      TAXES

5.1  PAYMENT AND APPORTIONMENT OF REAL PROPERTY TAXES AND PERSONAL PROPERTY
TAXES.  With respect to Taxes:

     5.1.1   REAL AND PERSONAL PROPERTY TAXES.  All ad valorem taxes, real
     property taxes and personal property taxes ("Real and Personal Property
     Taxes") for the year in which the Effective Date occurs shall be
     apportioned as of the Effective Date between Seller and Buyer.  Seller
     shall be liable for the portion of such Real and Personal Property Taxes
     based upon the number of days in the year occurring prior to the Effective
     Date, and Buyer shall be liable for the portion of such taxes based upon
     the number of days in the year occurring on and after the Effective Date. 
     For any year in which an apportionment is required, Buyer shall file all
     required reports and returns incident to these taxes and shall remit to the
     appropriate taxing authorities all such taxes assessed for the year in
     which the Effective Date occurs.  Seller shall pay to Buyer, at the time of
     Buyer's remittance, Seller's share of such taxes.

     5.1.2   LIABILITY AND RIGHT TO PURSUE CLAIMS.  Seller shall retain
     liability for all adjustments, examinations or claims relating to Taxes
     that are paid by Seller and that are allocated to Seller


                                      -21-
<PAGE>

     pursuant to this Article 5.01.  Seller shall administer and defend any 
     examination, claim or adjustments arising in connection with Taxes 
     which are allocated to Seller pursuant to this Article 5.01.
     
5.2  OTHER TAXES.  All excise, severance, windfall profit and other Taxes
relating to production of Hydrocarbons attributable to the Assets prior to the
Effective Date shall be allocated to Seller, and all such Taxes relating to
production on or after the Effective Date shall be apportioned to Buyer.  Buyer
shall file any reports or returns not filed as of the Closing, and shall remit
to the proper taxing authorities any such Taxes allocated to Seller, but not
paid as of the Closing.  Seller shall pay Seller's share of such Taxes at the
time Buyer remits such Taxes.

5.3  SALES TAXES.  The Purchase Price does not include any sales Taxes or other
transfer Taxes imposed in connection with the sale of the Assets.  Buyer shall
pay any sales Tax or other transfer Tax, as well as any applicable conveyance,
transfer and recording fee, and real estate transfer stamps or taxes imposed on
the transfer of the Assets pursuant to this Agreement.  If Buyer is of the
opinion that it is exempt from the payment of any such sales Tax or other
transfer Tax, Buyer shall furnish to Seller the appropriate tax exemption
certificate.

5.4  TAX PROCEEDINGS.  In the event Buyer or any of Buyer's Affiliates receives
notice of any examination, claim, adjustment or other proceeding relating to the
liability for Taxes of or with respect to Seller for any period Seller is or may
be liable under Article 5.01.02, Buyer shall notify Seller in writing within 20
days of receiving notice thereof.  As to any such Taxes for which Seller is or
may be liable under Article 5.01.02, Seller shall, at Seller's expense, control
or settle the contest of such examination, claim, adjustment or other
proceeding, and shall indemnify Buyer against all Losses in connection
therewith.  The Parties shall cooperate with each other and with their
respective Affiliates in the negotiations and settlement of any proceeding
described in this Article 5.04.  Buyer shall provide, or cause to be provided,
to Seller necessary authorizations, including powers of attorney, to control any
proceeding which Seller is entitled to control pursuant to Article 5.

5.5  PURCHASE PRICE ALLOCATION.  The allocation of Purchase Price provided for
in Article 2.04 is intended to comply with the allocation method required by
Section 1060 of the Code.  Buyer and Seller shall cooperate to comply with all
substantive and procedural requirements of Section 1060 and regulations
thereunder, including without limitation the filing by Buyer and Seller of an
IRS Form 8594 with their federal income tax returns for the taxable year in
which the Closing occurs.  .

                                    ARTICLE 6
                              ENVIRONMENTAL MATTERS

6.1  DEFINITIONS.  For the purposes of this Agreement, the following terms have
the following meanings:

     6.1.1   "Environmental Claims" means actions, claims, or proceedings by
     Third Persons associated with the Property Interests and based on
     Environmental Conditions or


                                      -22-
<PAGE>

     Environmental Law in connection with any chemical substance on or 
     originating from a Property Interest prior to the Effective Date, 
     except for the portion of any such claim associated with Remediation.

     6.1.2   "Environmental Condition" means a condition that exists prior to
     the Effective Date, and only to the extent in existence on the Effective
     Date, with respect to the air, land, soil, surface, subsurface strata,
     surface water, ground water, or sediments which causes a Property Interest
     to be subject to Remediation under, or not in compliance with, an 
     Environmental Law or a lease or agreement, excluding Plugging and
     Abandonment.

     6.1.3   "Environmental Law" means any Law relating to pollution, the
     protection of the environment, or the release or disposal of waste
     materials, but shall not include any Law associated with Plugging and
     Abandonment.

     6.1.4   "Environmental Matter" means an Environmental Condition or an
     Environmental Claim.

     6.1.5   "Expenses" means the actual amounts expended under a Remediation
     Plan to remedy an Environmental Condition, and amounts expended to
     determine the extent of the Environmental Condition and to determine the
     appropriate means of Remediation, but not Buyer's investigation expenses
     (including costs of surveys, audits or analyses) prior to Buyer notifying
     Seller of the potential Environmental Condition.

     6.1.6   "Property Interest" means any single Lease or Easement.

     6.1.7   "Remediation" means actions taken to correct an Environmental
     Condition and implement the terms of a Remediation Plan.

     6.1.8   "Remediation Plan" means the written plan, and any amendments
     thereof, that sets forth the actions to be taken to effect any necessary
     Remediation of a single Environmental Condition or a group of related and
     reasonably proximate Environmental Conditions, and necessary to bring a
     Property Interest or Property Interests into compliance with Environmental
     Law, or a lease or agreement and, if appropriate, approved by any
     applicable Governmental Body.

6.2  SELLER REPRESENTATIONS.  Seller represents and warrants to Buyer that:

     6.2.1   DISCLOSURE.  Seller has no Knowledge of any facts or circumstances
     that are likely to result in Losses to Seller or Buyer under this Agreement
     for any single Environmental Matter in excess of $25,000.00.

     6.2.2   PAST USE OF PROPERTY INTEREST.  To the Seller's Knowledge, at no 
     time have the Property Interests been used by Seller or others as a 
     landfill or for waste disposal, other than


                                      -23-
<PAGE>

     such activities associated with normal oil field operations.

     6.2.3   OFFSITE DISPOSAL.  To the Seller's Knowledge, at no time have
     hazardous waste or hazardous substances from the Property Interests been
     disposed of otherwise than in accordance with applicable law.

6.3  SELLER'S INDEMNITY.  Except as set forth in Article 6.04, Seller shall
indemnify, defend, and hold Buyer harmless from any and all:

     6.3.1   Expenses;

     6.3.2   Losses associated with Environmental Claims;

     6.3.3   breaches of any representation, warranty, covenant, or agreement of
     Seller in Article 6.02.

6.4  LIMITATIONS.  With regard to Article 6.03:

     6.4.1   Seller shall be liable for all Expenses or Losses under Article
     6.03 except as follows:

          (a)  Seller shall not be liable for Expenses or Losses less than a
          cumulative total of $25,000;

          (b)  Seller shall not be liable for Expenses or Losses in excess of a
          cumulative total of $125,000; and

          (c)  Seller shall be responsible only for Expenses and Losses under
          Article 6.03 with respect to which Buyer gives Seller written notice
          prior to 45 days from the Effective Date.

     6.4.2   If Buyer timely claims Expenses and Losses in excess of $125,000,
     then either Buyer or Seller may elect within 60 days after the Closing Date
     to rescind the transaction called for by this Agreement, and Buyer shall
     promptly reconvey the Assets to Seller.  In the event of such a
     reconveyance, Buyer shall indemnify and hold harmless Seller from all
     Losses and Expenses (of any kind) relating to the Assets during the period
     of time between the Closing Date and the date of reconveyance, and Seller
     shall indemnify and hold harmless Buyer from all Losses and Expenses (of
     any kind) relating to the Assets during all other periods of time.  In the
     event of reconveyance, Buyer shall be entitled to recovery, only from
     production of Hydrocarbons from the Leases after the Effective Date and
     before reconveyance, of its expenses incurred in the operation and
     development of the Assets during its period of ownership of the Assets, and
     Seller shall be entitled to all other income from the Assets.


                                      -24-
<PAGE>

6.05  BUYER'S RESPONSIBILITIES.  Except in the event of reconveyance as provided
in Article 6.04, Buyer shall indemnify, defend, and hold Seller harmless from
any and all Expenses or Losses resulting from Environmental Matters arising with
respect to the Property Interests on or after the Effective Date.

6.06  EXCLUSIVE REMEDIES.  The rights and remedies granted each Party in Article
6 are exclusive rights and remedies against the other Party related to any
defined Environmental Condition and to any Environmental Claims asserted in
writing after the Closing.

                                    ARTICLE 7
                                    INDEMNITY

7.01  GENERAL INDEMNIFICATION.

     7.1.1   SELLER.  For the period set forth in Article 7.01.03, and except
     with respect to Taxes (which are covered by Article 5), and  Environmental
     Matters (which are covered by Article 6), Seller shall indemnify, defend
     and hold harmless Buyer from and against all Losses based upon, arising out
     of, in connection with, or relating to:

          (a)  any breach of any covenant or agreement of Seller contained in
          this Agreement;

          (b)  any breach of any representation or warranty of Seller contained
          in this Agreement;

          (c)  any matter arising in connection with the ownership or operation
          of or production of Hydrocarbons from the Assets on or after April 10,
          1995, and prior to the Effective Date;

          (d)  all actions, proceedings, claims, litigation, arbitration,
          mediation or other dispute resolution procedure pending as of the
          Effective Date relating to or affecting the Assets; and

          (e)  the matters set forth on Schedules 3.01.05.

     7.01.02   BUYER.  For the period set forth in Article 7.01.03, and except
     with respect to Taxes (which are covered in Article 5) and Environmental
     Matters (which are covered by Article 6), Buyer shall indemnify, defend and
     hold harmless Seller from and against all Losses based upon, arising out
     of, in connection with, or relating to:

          (a)  any breach of any covenant or agreement of Buyer contained in
          this Agreement;



                                      -25-

<PAGE>


          (b)  any breach of any representation or warranty of Buyer contained
          in this Agreement;

          (c)  if the Closing occurs, any matter arising in connection with the
          ownership or operation of or production of Hydrocarbons from the
          Assets from and after the Effective Date; and

          (d)  the Assumed Liabilities.

     7.01.03   DURATION.  The indemnities set forth in Articles 7.01.01(a), (c),
     and (d), and in Article 7.01.02, shall apply only to Losses as to which
     claims are asserted under Article 7.02 on or before three years after the
     Closing Date.  The indemnity set forth in Article 7.01.01(e) shall survive
     without limit.  The indemnities set forth in Articles 7.01.01(b) and
     7.01.02(b) shall survive for a period of one year after the Closing Date.

7.02  METHOD OF ASSERTING CLAIMS, ETC.  Except for claims under Article 5 
(Taxes) and claims for reimbursement for Remediation under Article 6 
(Environmental), all claims for indemnification under this Agreement shall be 
asserted and resolved as provided in this Article 7.02.  The provisions of 
Articles 7.02.01 and 7.02.02 shall be covenants and not conditions to the 
defense and indemnity obligations to which they apply.

     7.02.01   THIRD PERSON CLAIMS.  In the event that any claim for which a 
     Party providing indemnification (the "Indemnifying Party") would be 
     liable to a Party or any of its officers, directors, employees, agents 
     or representatives entitled to indemnification hereunder (the 
     "Indemnified Party") is asserted against or sought to be collected by a 
     Third Person, the Indemnified Party shall promptly notify the 
     Indemnifying Party of such claim, specifying the nature of such claim 
     and the amount or the estimated amount thereof to the extent then 
     feasible (which estimate shall not be conclusive of the final amount of 
     such claim) (the "Claim Notice").  The Indemnifying Party shall have 30 
     days from its receipt of the Claim Notice (the "Notice Period") to 
     notify the Indemnified Party 

          (a)  whether or not it disputes its liability to the Indemnified Party
          hereunder with respect to such claim, and 

          (b)  if it does not dispute such liability, whether or not it desires,
          at its sole cost and expense, to defend the Indemnified Party against
          such claim; provided, however, that the Indemnified Party is hereby
          authorized prior to and during the Notice Period to file any motion,
          answer or other pleading, submission or document which it shall deem
          necessary or appropriate to protect its interests.  

     In the event that the Indemnifying Party notifies the Indemnified Party
     within the Notice Period that it does not dispute such liability and
     desires to defend against such claim or demand, then, except as hereinafter
     provided, the Indemnifying Party shall have the right to



                                     -26-

<PAGE>


     defend such claim or demand by appropriate proceedings, which
     proceedings shall be promptly settled or prosecuted to a final
     conclusion, in such a manner as to avoid any risk of the Indemnified
     Party becoming subject to liability.  If the Indemnified Party desires
     to participate in, but not control, any such defense or settlement, it
     may do so at its own cost and expense.  If the Indemnifying Party
     disputes its liability with respect to such claim, or elects not to
     defend against such claim, whether by not giving timely notice as
     provided above or otherwise, the Indemnified Party shall have the right
     but not the obligation to defend against such claim, and the amount of
     any such claim, or if the same be contested by the Indemnifying Party or 
     by the Indemnified Party, then that portion thereof as to which such
     defense is unsuccessful, shall be conclusively deemed to be a liability of
     the Indemnifying Party hereunder (subject, if it has timely disputed
     liability, to a determination in accordance with Article 7.03.03 that the
     disputed liability is covered by this Article 7.)

     7.02.02   OTHER CLAIMS.  In the event that the Indemnified Party shall 
     have a claim against the Indemnifying Party hereunder which does not 
     involve a claim or demand being asserted against or sought to be 
     collected from it by a Third Person, the Indemnified Party shall 
     promptly send a Claim Notice with respect to such claim to the 
     Indemnifying Party.  If the Indemnifying Party does not notify the 
     Indemnified Party within the Notice Period that it disputes such claim, 
     the amount of such claim shall be conclusively deemed a liability of the 
     Indemnifying Party hereunder.
     
7.03 PAYMENT.  Payments for claims asserted under Article 7.02 shall be made as
     follows:

     7.03.01   PAYMENT OF UNDISPUTED AMOUNT.  In the event that the Indemnifying
     Party is required to make any payment, the Indemnifying Party shall
     promptly pay the Indemnified Party the amount so determined.  If there
     should be a dispute as to the amount or manner of determination of any
     indemnity obligation owed, the Indemnifying Party shall nevertheless pay
     when due such portion, if any, of the obligation as shall not be subject to
     dispute.  The difference, if any, between the amount of the obligation
     ultimately determined as properly payable and the portion, if any
     theretofore paid, shall bear interest at the Agreed Rate.  Upon the payment
     in full of any claim, the Indemnifying Party shall be subrogated to the
     rights of the Indemnified Party against any Person or other entity with
     respect to the subject matter of such claim.

     7.03.02   INTEREST.  If all or part of any indemnification obligation under
     this Agreement is not paid when due upon resolution of the claim, then the
     Indemnifying Party shall pay on demand to the Indemnified Party interest at
     the Agreed Rate on the unpaid amount of the obligation for each day from
     the date the amount became due until payment in full.

     7.03.03   DISPUTED CLAIMS.  If the Indemnifying Party shall notify the
     Indemnified Party during the Notice Period that it disputes any claim
     asserted under Article 8.02 (the "Disputed Claim"), the Disputed Claim
     shall be subject to arbitration as provided in this Agreement.



                                     -27-

<PAGE>


                                    ARTICLE 8
                              CONDITIONS PRECEDENT

8.01  CONDITIONS PRECEDENT OF BUYER.  The obligations of Buyer to consummate the
transactions contemplated by this Agreement are subject to the following
conditions:

     8.01.01   REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING.  The
     representations and warranties of Seller contained in this Agreement or in
     any certificate or document delivered pursuant to the provisions hereof, or
     in connection with the transactions contemplated hereby, were true and
     complete when made, and shall be true and complete on and as of the Closing
     Date as though such representations and warranties were made at and as of
     such date except as otherwise expressly provided herein.

     8.01.02   COMPLIANCE WITH AGREEMENT.  On and as of the Closing Date, Seller
     shall have performed and complied with all agreements, covenants, and
     conditions required by this Agreement to be performed and complied with
     prior to or on the Closing Date.

     8.01.03   CERTIFIED RESOLUTIONS AND OFFICERS' CERTIFICATE.  Seller shall
     have delivered to Buyer 
          (a)  a certificate dated the Closing Date signed by the Secretary or
          an Assistant Secretary of Seller with respect to the action of
          Seller's Board of Directors authorizing the transactions contemplated
          by this Agreement, and 

          (b)  a certificate, dated the Closing Date and signed by the President
          or a Vice President of Seller certifying in such detail as Buyer may
          reasonably request to the fulfillment of the conditions specified in
          Articles 8.02.01 and 8.02.02.

     8.01.04   INJUNCTION.  On the Closing Date, there shall be no injunction,
     writ, or preliminary restraining order or any order of any nature issued by
     a court or other Governmental Body of competent jurisdiction directing that
     the transaction provided for herein or any of them not be consummated as
     herein provided or imposing any conditions on the consummation of the
     transactions contemplated hereby and no material proceeding or lawsuit
     shall have been commenced or threatened by any Governmental Body or other
     Person with respect to any of the transactions contemplated by this
     Agreement.

     8.01.05   CONVEYANCE.  Seller shall execute, acknowledge and deliver to
     Buyer the Assignment and Bill of Sale, as well as change of operator forms
     required by applicable Laws and such other documents as may be necessary to
     carry out the purpose of this Agreement.

     8.01.06   LETTERS IN LIEU.  Buyer and Seller shall execute, acknowledge and
     deliver all Letters in Lieu.

     8.01.07   NO MATERIAL ADVERSE CHANGE.  Since the Effective Date, there 
     shall not have occurred with respect to the Assets as a whole any 
     material adverse change in the condition


                                     -28-

<PAGE>


     or value thereof other than changes in the ordinary course of business, 
     changes occurring on account of normal declines in production, changes 
     in the value of such properties other than changes resulting from events 
     or circumstances that affect the oil and gas industry generally.

8.02 CONDITIONS PRECEDENT OF SELLER.  The obligations of Seller to consummate
the transactions contemplated by this Agreement are subject to the following
conditions:

     8.02.01   REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING.  The
     representations and warranties of Buyer contained in this Agreement or in
     any certificate or document delivered pursuant to the provisions hereof, or
     in connection with the transactions contemplated hereby, were true and
     complete when made, and shall be true and complete on and as of the Closing
     Date as though such representations and warranties were made at and as of
     such date except as otherwise expressly provided herein.

     8.02.02   COMPLIANCE WITH AGREEMENT.  On and as of the Closing Date, Buyer
     shall have performed and complied with all agreements, covenants, and
     conditions required by this Agreement to be performed and complied with
     prior to or on the Closing Date.

     8.02.03   CERTIFIED RESOLUTIONS AND OFFICERS' CERTIFICATE.  Buyer shall
     have delivered to Seller 
          (a)  a certificate dated the Closing Date signed by the Secretary or
          an Assistant Secretary of Buyer with respect to the action of Buyer's
          Board of Directors authorizing the transactions contemplated by this
          Agreement, and 

          (b)  a certificate dated the Closing Date and signed by the President
          or a Vice President of Buyer certifying in such detail as Seller may
          reasonably request to the fulfillment of the conditions specified in
          Articles 8.01.01 and 8.01.02

     8.02.04   INJUNCTION.  On the Closing Date, there shall be no injunction,
     writ, or preliminary restraining order or any order of any nature issued by
     a court or other Governmental Body of competent jurisdiction directing that
     the transactions provided for herein or any of them not be consummated as
     herein provided or imposing any conditions on the consummation of the
     transactions contemplated hereby and no material proceeding or lawsuit
     shall have been commenced or threatened by any Governmental Body or other
     Person with respect to any of the transactions contemplated by this
     Agreement.

     8.02.05   CONVEYANCE.  Buyer shall execute, acknowledge and deliver to 
     Seller such documents as may be necessary to carry out the purposes of 
     this Agreement.

     8.02.06   LETTERS IN LIEU.  Buyer and Seller shall execute, acknowledge and
     deliver the Letters in Lieu.


                                    ARTICLE 9
                                  MISCELLANEOUS


                                      -29-


<PAGE>


9.01  NOTICES.  All notices, consents, requests, demands, and other
communications hereunder shall be in writing and shall be deemed to have been
duly given or delivered if 

     9.01.01   delivered by hand, 

     9.01.02   delivered by a recognized overnight commercial courier (receipt
     requested), or 

     9.01.03   sent by telecopier (with receipt confirmed), provided that a copy
     is promptly thereafter mailed in the United States by first-class postage
     prepaid mail, 

to the Party as follows (or to such other address as any Party shall have last
designated by 15 days' notice to the other Parties).  
     
     If to Buyer: 

     Redfish Bay Development Corporation
     Pi Energy Corporation
     333 Clay Street, Suite 4310
     Houston, TX 77002
     Fax: (713) 650-9208

     If to Seller: 

     Midland Resources, Inc. and
     Summit Petroleum Corporation
     16701 Greens Point Park Drive, Suite 200
     Houston, TX 77060
     Fax: (713) 873-5058

A notice shall also be deemed given if an original, photocopy or facsimile is
actually received by the Persons designated to receive notice, regardless of the
manner of transmission.

9.02  MODIFICATION.  This Agreement, including the Exhibits and Schedules, shall
not be modified except by an instrument in writing signed by the Parties.

9.03  GOVERNING LAW.  This Agreement shall be governed by and construed and
enforced in accordance with the Laws of the State of Texas, except those laws
and principles governing conflicts of law.

9.04  ASSIGNMENT.  This Agreement and the rights and obligations created
hereunder shall not be assigned prior to Closing by either Party except that
Buyer may assign its rights to a single subsidiary of Buyer provided Buyer
remains primarily liable for the performance of all obligations hereunder.


                                      -30-

<PAGE>

 
Subsequent to Closing either Party may assign their obligations hereunder
provided the Party remains primarily liable for the performance of the Party's
obligations hereunder.  Subsequent to Closing neither Party may assign its
rights or interests under this Agreement except in connection with a sale of all
or substantially all of the Assets of the Party or in connection with a merger
or similar transaction.  Seller's obligations under this Agreement shall not be
expanded in any manner by a transfer of Assets by Buyer, and Buyer's rights
hereunder shall not be limited in any manner by a transfer of Assets.

9.05  COUNTERPARTS.  This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.

9.06  INVALIDITY.  If any of the provisions of this Agreement including the
Schedules is held invalid or unenforceable, such invalidity or unenforceability
shall not affect in any way the validity or enforceability of any other
provision of this Agreement.  In the event any provision is held invalid or
unenforceable, the Parties shall attempt to agree on a valid or enforceable
provision which shall be a reasonable substitute for such invalid or
unenforceable provision in light of the tenor of this Agreement and, on so
agreeing, shall incorporate such substitute provision in this Agreement.

9.07  ENTIRE AGREEMENT AND CONSTRUCTION.  This Agreement contains the entire
agreement between the Parties with respect to the transactions contemplated
hereby and all prior understandings and agreements shall merge herein.  There
are no additional terms, whether consistent or inconsistent, oral or written,
which are intended to be part of the Parties' understandings which have not been
incorporated into this Agreement and the Schedules and Exhibits.  The Parties
agree that they have jointly participated in the drafting and preparation of
this Agreement and that the language of this Agreement shall be construed as a
whole according to its fair meaning and not strictly for or against any of the
Parties hereto.

9.08  EXPENSES.  Except as otherwise expressly provided herein, each Party shall
bear its fees, costs and expenses in connection with the transactions
contemplated herein, including, without limitation, all legal and accounting
fees and disbursements and fees and expenses of other advisors retained by such
Party.

9.09  WAIVERS AND AMENDMENTS.  All amendments and other modifications hereof
shall be in writing and signed by each of the Parties.  Either Party may by
written instrument 

     9.09.01   waive any inaccuracies in any of the representations or 
     warranties made to it by any other Party contained in this Agreement or 
     in any instruments and documents delivered to it pursuant to this 
     Agreement, or 

     9.09.02   waive compliance or performance by the other Party with or of any
     of the covenants or agreements made to it by the other Party contained in
     this Agreement.  

The delay or failure on the part of a Party hereto to insist, in any one
instance or more, upon strict


                                      -31-

<PAGE>


performance of any of the terms or conditions of this Agreement, or to 
exercise any right or privilege herein conferred shall not be construed as a 
waiver or any such terms, conditions, rights or privileges but the same shall 
continue and remain in full force and effect.  All rights and remedies are 
cumulative. The waiver of a condition to Closing by a Party regarding a 
warranty, representation or covenant shall not constitute a waiver of a 
breach of such warranty, representation or covenant; provided, however, that 
the Parties shall attempt in good faith to agree prior to Closing upon the 
resolution of a breach of a representation or warranty that arises after the 
date of this Agreement which could result in liability to the breaching Party 
and of which the other Party has actual Knowledge, and if the Parties cannot 
agree upon a resolution, the breach shall be deemed waived if the Closing 
occurs.

9.10 SURVIVAL OF WARRANTIES, REPRESENTATIONS AND COVENANTS.  All representations
and warranties contained in this Agreement shall survive the Closing and
continue with respect to claims made on or before one year following the Closing
Date.  The covenants, indemnities and agreements contained in this Agreement
shall survive the Closing and continue in accordance with their respective
terms.

9.11 ARTICLE HEADINGS.  The Article headings in this Agreement are for
convenience of reference only and shall not be deemed to alter or affect the
interpretation of any provision thereof.

9.12 DISPUTE RESOLUTION. Except as expressly provided to the contrary in this
Agreement, the parties shall submit every dispute relating to this Agreement to
binding arbitration as follows: 

     9.12.01   SELECTION OF ARBITRATOR.  The parties shall use reasonable 
     efforts to select a mutually acceptable arbitrator.  If the parties fail 
     to agree on an arbitrator within 15 days, either party may request the 
     judge of the United States District Court for the Southern District of 
     Texas having greatest tenure, but not yet on retired or senior status, 
     to appoint an arbitrator.  If that judge fails to do so within 30 days, 
     either party may request the judge of that court next senior to name the 
     arbitrator, and if that judge fails to do so after ten days, either 
     party may make the request of the judge of that court next senior, and 
     so on, until the arbitrator is appointed.  

     9.12.02   QUALIFICATIONS OF ARBITRATOR.  Each arbitrator shall be
     knowledgeable about matters affecting the issue(s) for which such
     arbitrator is appointed (and where applicable, shall be a professional in
     the matter in dispute) or shall be a former member of the Texas or federal
     judiciary, and shall be required to meet the qualification requirements of
     the Commercial Arbitration Rules of the American Arbitration Association
     (the "AAA Rules").  If prior to rendering a decision an arbitrator resigns
     or becomes unable to serve, the arbitrator will be replaced using the
     mechanism set forth herein.

     9.12.03   SUIT PROHIBITED.  No party will commence or prosecute any suit or
     action against another party other than as may be necessary to compel
     arbitration or to enforce the award of an arbitrator.



                                      -32-

<PAGE>


     9.12.04   DAMAGES.  The arbitrator shall not have any authority to award
     consequential, exemplary or punitive damages.  The sole forum for the
     arbitration shall be Harris County, Texas and all hearings shall be
     conducted in Harris County, Texas.

     9.12.05   DECISION.  The decision of the arbitrator shall be rendered in
     writing and shall be final and binding upon the parties.  Any party shall
     have the right to entry of judgment, by any court of competent
     jurisdiction, upon the decision of the arbitrator.  Unless declared
     otherwise by the arbitrator:

          (a)  The expenses of arbitration, including compensation to the
          arbitrator, shall be borne equally by the parties;

          (b)  each party shall bear the compensation and expenses of its own
          counsel, witnesses and employees; and

          (c)  if the testimony of a witness is obtained by both parties, the
          costs associated with obtaining such testimony shall be borne equally
          between the parties.

     9.12.06   AAA RULES.  Matters not specifically provided for herein shall be
     governed by the AAA Rules.

IN WITNESS WHEREOF, the Parties hereto have entered into this Agreement as of
the date first herein above written.


PI DEVELOPMENT CORPORATION


By: 
   ------------------------------------
Jon M. Fleming,
Vice President and General Counsel


REDFISH BAY DEVELOPMENT CORPORATION


By: 
   ------------------------------------
Jon M. Fleming, President


MIDLAND RESOURCES, INC.



                                      -33-
<PAGE>



By: 
   ------------------------------------
Deas H. Warley, President


SUMMIT PETROLEUM CORPORATION


By: 
   ------------------------------------
Deas H. Warley, President




                                      -34-